The Civil War and Industrial Revolution

The Civil War and Industrial Revolution


The Civil War represented a critical moment in American history primarily because of the resulting economic consequences that revolutionized the country. The subsequent industrial revolution which was associated with the American civil war would peak between 1870 and 1914 following the preceding territorial expansion activities and unprecedented urbanization (Ashworth, 94). America encompassed an unlimited supply of natural resources stemming from abundant labor provided by emancipated African Americans and immigrants from Europe. A notable outcome of the Civil War is perhaps the financial prospects that disrupted the traditional banking system towards radical changes in the United States economy. The financial revolution commencing in 1961 was a pure government intervention that sought to tame economic challenges of prevailing war, least at the expense of long-term prosperity. The paper strives to examine the financial revolution resulting from the Civil War and how the monetary system facilitated the fruition of the second Industrial Revolution in the United States of America as outlined. The paper will also include John Cooke’s contributions and strategies in financial reforms as well as compare and contrast the north and south in order to highlight the successes of these reforms in the north.

In a nutshell, the industrial revolution stemmed from the victory of one of the two factions that fought against each other during the American civil war. The North side for example, experienced rapid industrialization while successfully suppressing rebellion from the Southern side. This resulted in the North’s economic capacity soaring during the period of the war as opposed to the South which had been exclusively dependent on agriculture based economy (Burdekin et. al, 353) during the period of the war. Further, Cooke aided in the development of a tight financial policy that availed the North, through the government, with the needed capital to win the civil war. Cooke for example, took part in loans negotiations for the government in addition to handling the sale of government bonds. Notably, by the end of the Civil War, Cooke had secured more than three billion dollars for the federal government through various loans earning himself the tag name; the “financier of the Civil War.” John Rogers Cooke was basically a Confederate general during the period of the American Civil War. His major contributions during the American civil war apart from the financial mobilizations were among others; significantly taking part in the Battle of Sutherland’s Station, and helping in the successful resistance to Union attacks (Jay Cooke, 01) therefore enabling other Confederate factions to retreat.

As a result of the foregoing successes of the Union, nearly all aspects of the Union’s economy experienced a big percentage of increased production. The success at the civil war led to among others the mechanization of farming which for example enabled a single farmer growing different crops like wheat or corn to take care of the planting, harvesting and the storing process much easier, faster, and in large quantities than was possible before wining of the civil war where the use of human, and animal power was the order of the day. The importance and benefits of the mechanization, which in essence was industrialization, became more apparent when many farmers had to leave home to be part of the Union military. The few who had not enlisted in the military and were tasked with taking care of the farms were able to continue to manage the said farms because of labor-saving devices such as horse-drawn planters, and reapers which came to be because of mechanization.

The paper thus delves into other categories of mechanization or industrialization such as the building of the Transcontinental roads which has its origin directly from the American civil war. The paper also discusses the consequences, both negative and positive, of the resulting industrial and financial revolution that is traceable to the American civil war as illustrated below


The Building of the Transcontinental Railroad

Transport system was one of the hallmarks of the resulting industrial revolution given that the goods that were produced in bulk due to the mechanization had to be transported from the manufacturing source to other parts of the United States of America. In particular, the North having emerged victorious at the end of the war had its transportation industries and system balloon with the major transport system being the railroads. The North’s extensive number of tracks and its unmatched ability in construction automatically gave it another advantage over the South. This advantage was manifested in the decision to have the Transcontinental Railroad be built along the Northern route as opposed to along the southern route as was fronted by the South.

The decision to build the Transcontinental Railroad was supported by the Pacific Railway Act which was accented in 1862, July by the President of the United States of America at that time, Lincoln. The transcontinental railroad which was to link the East to the West had, just like the previous homestead bill, been viciously fronted by the pre-war Congresses. In the initial stages, the Southerners proposed that the railroad be built along the southern route while the Northerners strongly objected to the same and proposed that the Transcontinental Railroad pass along the Northern route. Ultimately, the North won and as a result had the Transcontinental Railroad built along the Northern route (Burdekin et. al, 353).

 Financial Revolution

The American civil war also saw the Congress pass a number of money related bills that literally financially revolutionized the monetary system of the United States of America. The Legal Tender Act for example, allowed the federal government to print and circulate paper money for the first time (Swee, 107). The paper money was also known as “greenbacks,” and the government too used it to pay its bills and to finance the Civil war. This was despite the greenbacks not being backed by corresponding amounts of gold or silver as ordinarily expected. The creditors and businesses were therefore expected to accept greenbacks at face value. Notably, the uptake of the greenbacks was so impressive that at the end of the war, the government of the day had printed well over $500 million of greenbacks, marking the end of the American financial system’s strict reliance on transactions in gold and silver. The legal tender act singlehandedly resulted financial revolution from trading in gold or silver to trading in greenbacks

The second notable monetary legislation was the National Bank Act. The Act served to create a national banking system that was able to limit the number of notes rolled out by individual banks and at the same time create a single federal currency. Lastly, the Internal Revenue Act help reduce the resulting inflation as a result of the civil war  through having excise taxes levied on many luxurious items at the time such as tobacco and jewelry. Basically, the three legislations namely; the legal tender Act, the National bank Act, and the Internal revenue Act solely contributed to the financial revolution associated with the American civil war era (Ashworth, 95)

The Consequences of the Resulting Financial and Industrial Revolution

The civil war had both negative and positive consequences depending on the faction of the war one found self. For example, in what came to be known as the Hecker-Beard thesis, it is argued that at the bottom of the civil war also referred to as the War Between the States was a social war that resulted into the establishment of a new political order. The financial and industrial revolution associated with the civil war also resulted in the abolition of the slave trade or labour, increment of tax, and introduction of other far reaching legislations.

New political order and the onset of capitalism

The American civil war and the resulting financial and industrial revolution led to unquestioned entrenchment of a new power system in the government. The New system of government came accompanied with industrial capitalism. The government of the day which was the Republicans literally became the spokesperson of industrial capitalism. This enabled the government to use the capitalist instruments to strengthen the government’s economic power. These capitalist instruments were among others; the public-land principle, the railroad, the contract labor legislation, the passage of tariff, and the banking system.

End of slave trade, and slave ownership era.

The North’s victory at the end of the civil war on top of preserving the Union, led to the elimination of the right to own slaves, or engage in slave trade in the United States. The elimination of slave trade and the subsequent freeing of the slaves resulted in an estimated economic loss of about 2 billion dollars to southern planters who solely depended on slaves (Anderson, 182) to do their plantation farming. The loss was strongly felt in the cotton production sector that experience a sharp decline in cotton production that was directly the result of an end to slavery and the resulting breakup of the plantation farming  system

Tax Increment

The financial revolution and post effect of the civil war necessitated a sharp increase in taxes payable to the government. Notably, both sides of the divide were forced to a large extent to rely on deficit finance to finance the war. To cover this deficit, the Union opted to increase tax revenues by charging higher tariff, in addition to the higher excise taxes, and the passing of a tax on incomes over $10,000 per year. The foregoing measures notwithstanding, tax revenues only accounted for about a fraction of all the federal revenues used up during the war.

Other legislations

In addition to the National Banking Act which entrenched a system of banks that are chartered by the federal government and the issuance of a single currency, other Acts such as the Homestead Act were associated with the American civil war. The homestead Act for example, gave settlers allotments of about 160 acres of free land in the West. In total, over 1 million parcels of land were distributed under the ambit of the Homestead Act. Consequently, The Pacific Railway Act enabled the construction of the railway through provisions of grants of federal land to be used in building the first transcontinental railroad. Notably, by 1900 five transcontinental railways were already completed and over 200,000 miles of railroads constructed in the United States of America (Swee, 111). Therefore, in addition to the financial bills that were passed, other legislations such as the Homestead Act and the Pacific Railway Act was a direct consequence of the industrial and financial revolution emanating from the American civil war.


From the foregoing discussions it is indeed evident that the American civil war inadvertently led to the financial revolution which ended up leading also to the second industrial revolution in the United States of America. The financial revolution was spearheaded by the numerous monetary legislations passed during the period of the American civil war. These monetary legislations included among others; the Legal Tender Act, the National Bank Act, and the Internal Revenue Act. On the other hand, the second industrial revolution resulted from the North’s win which led to the taking over of revolution from the South, which was mainly agricultural in nature. The second revolution therefore was a total departure from the South’s first revolution that was driven by agriculture to the North’s revolution that was mostly driven by mechanisation. The mechanisation driving factor in the second second revolution therefore resulted in the replacing of human or mostly slave labor with machines, and the building of the transportation system that was mainly the railway system.